The British pound currency has continued to fall against the US dollar as the greenback loses ground on the currency market, ahead of a slew of central bank rate decisions.
The Fed is the main event this week without a doubt, however, sterling traders have been subdued in buying in case the Bank of England throws up any shocks.
Market expectations are for the BoE to raise borrowing costs again, but the market is wondering whether recent stresses in the banking sector might lead to a moderation in their assessments of likely increases to come.
Sterling sentiment has also been hit by recent budget data. The State’s reliance on debt was underlined Tuesday by official news that Public Sector Net Borrowing was £16.7 billion in February.
This marked the highest level for that month since comparable records began in 1993. The figure was largely accounted for by ongoing schemes to help consumers with energy prices.
Looking at sentiment data and how traders feel about sterling, the ActivTrader Market Sentiment tool shows that traders are growing more bearish despite the recent sharp price reversal.
With 59% of traders currently bullish it should be noted that this current sentiment reading is highlighting that sterling still has much scope to trade even lower also.
GBPUSD Short-term Technical Analysis
Looking at the four-hour time frame, a clear inverted head and shoulders pattern has formed, with the break happening around the 1.2300 level.
Therefore, the bullish inverted head and shoulders pattern is also close to being invalidated. According to the overall size of the pattern, I would expect that we could soon see a further 400 point more upside in GBPUSD if sterling clears 1.2300 this week.
GBPUSD Medium-term Technical Analysis
According to the daily time frame it shows that that GBPUSD pair is starting to settle above its 50-day and its 200-day moving average, which is located close to top of its medium-term range.
According to the technical analysis a breach of 1.1800 would be bad news. However, with the golden-cross underway I am expecting to see a move towards 1.2800 before 1.1800 is tagged.